4:37 am

Wed April 25, 2012

Are Bribes The Norm In Mexico's Business Culture?

Wal-Mart's stock price has fallen sharply this week. That comes after The New York Times reported that the retailer's rapid growth in Mexico involved systematic bribery. Stock prices have also fallen for Wal-Mart's Mexico subsidiary Walmex.

This negative reaction came, even though financial journalist Eduardo Garcia in Mexico City, says bribery is a normal part of business in Mexico.

Was anybody in the business community in Mexico surprised to hear these allegations against Wal-Mart?

EDUARDO GARCIA: Well, they were surprised because even though this is the way of modus operandus in Mexico, it's always shocking to see it out there in the public and being reported so extensively. So in that sense it was a shock that it made its way all the way to the public rather than that it happened.

INSKEEP: You said this is the way in Mexico. What is normal about this behavior if you're talking about doing business as a retailer in Mexico?

GARCIA: Well, in Mexico, the culture of bribing to speed up certain requisites for you to open a business, it's quite commonly done I would say. So it's almost part of your cost analysis when you do business in Mexico. Because even for a small shop owner, if he wants to open up his shop, there are so many bureaucratic rules that he has to fulfill that it's easiest for him to pay a small bribe than to do it the right way and be subject to long-delaying tactics by the bureaucrats.

INSKEEP: So are business owners paying this money to speed things up, or is it really more like extortion - they must pay or they'll just never get the required permits and permissions?

GARCIA: It's hard to say because they don't say if you don't give me this you'll never get it. But they do make your life very miserable and so you end up deciding to pay the bribe, which is wrong, but it's the way things have been done. The government has been trying to reduce red tape to avoid these practices by bureaucrats and to make things a little bit more transparent, but that's not yet totally guaranteed. You have to see that these allegations on Wal-Mart happened about six or seven years ago. Maybe they haven't done it so regular lately because of these reductions in red tape that the government has accomplished over the past few years.

INSKEEP: Oh, every regulation that goes away is one less opportunity for somebody to put their hand out or for somebody in a business to put money in that hand.

GARCIA: Exactly. And under these regulations are ridiculous. There was a TV show in Mexico that had a bureaucrat behind a counter and when someone came to ask for a permit, he would say, where are your report cards from your first grade or something like that.

(SOUNDBITE OF LAUGHTER)

GARCIA: And we all laughed because he never got to that point but he was very close.

INSKEEP: You know, I'm curious, though, we might have assumed that while a small shopkeeper might feel he has no choice or she has no choice but to pay, that a company like Wal-Mart might say, look, we're a multinational corporation, we're very big, we can fight you and not only that, we can't get away with paying you because there's the Foreign Corrupt Practices Act, which forbids Americans companies from paying bribes overseas. Couldn't a company like Wal-Mart just bulldoze their way past these kinds of problems?

GARCIA: I would say so. I would say that the problem with Wal-Mart in this case is that for such a large corporation with so much clout, it could've chosen to do the right thing and could've used its size and its prestige to help change the way things were done in Mexico, or are done in Mexico and they didn't choose to do that. That's why it's so embarrassing for them, I would say.